Coffee Market Report
The latest Commitment of Traders report from the New York arabica coffee market has seen the shorter term in nature Managed Money fund decrease their net long position by 5.82% within this market over the week of trade leading up to Tuesday 16th July 2024; to register a new long position at 62,933 Lots. The longer term in nature, Index Fund sector of this market decrease their net long position by 2.94% within the market, to register a new net long position of 47,759 Lots on the day.
Over the same week, the Non-Commercial Speculative decrease their net long position by 5.98% within the market over the week of trade leading to Tuesday 16th July 2024: to register a new net long position of 47,856 lots, which is the equivalent of 13,566,964 bags. This net long position has most likely been decreased further following the period of mixed but overall softer trade that has since followed.
Weather conditions are reported to be moderately warmer than historically normal, with temperatures predicted to be in the mid to low teens in degrees Celsius throughout the Brazil southeastern coffee regions. The midwinter full moon has passed uneventfully on 21st July and temperatures are forecast to remain mild as the Brazilian winter season continues. Weather is conducive for the harvest in this country, and this is near to completion in the robusta areas and is set to continue unhindered in the southeastern arabica regions into August. As the new harvest comes in, shipment delays and congestion build within key export ports in Brazil while lack of vessel availability and space constraints continue.
The new coffee crops in Mexico and Central America are steadily ripening, there has been some news of warmer and drier weather, ahead for the new October 2024 to September 2025 coffee year, it is not yet clear whether the warmer weather has had impact, if any, upon the new crop development within the region. There is, meanwhile, a seasonally steady flow of quality washed arabica coffee coming from Colombia and Peru to coffee consumer markets.
Within the largest robusta producing nation of Vietnam, reports of increased rainfall in the central highlands have come to the fore, which is well received following a lower-than-average pattern in the first half of the year. This seasonal rainfall is expected to continue through to October, ahead of the new crop harvest that is traditionally due to begin around October/November each year. This will be closely monitored by market participants as this internal supply remains tight for the limited unallocated coffee still in farmers hands, being released at a measured pace. This internal supply environment is unlikely to ease until this country’s new crop harvest starts to come to market toward the end of this year.
The new Indonesian robusta coffee crop harvest continues for their April 2024 to March 2025 coffee year. The new coffee crop which is around 85% robusta coffee and the balance arabica coffee, has been conservatively forecast ahead of the harvest to potentially reach a median of 10.90 million bags. The current firmer London coffee futures market has led to rising internal prices in this primarily robusta-producing nation. The comparatively informal internal producer market has seen strong competition emerge for both local and export demand for robusta coffee within Indonesia. There is news coming to the fore of higher percentages of exports of Brazil Conilon coffees are attracting interest within the import statistics for this country, which has both a developed local domestic consumer and value add export sector, as well as the traditional green bean export market share. This latter Indonesia robusta green bean export market share has scaled back over the years as domestic consumption has developed, even though this robusta producer still plays a top ten role in export supply to consumer markets. The country is forecast by the latest USDA report to ramp up exports to 6 million bags in this 2024/25 coffee year. It is a widely held view that Indonesia robusta that is largely a smallholder family farmer crop, could by ramping up yield through inputs, have the potential to double the average yield and collectively contribute to a potential for a countrywide increase in robusta production. The average yield per hectare in the main robusta growing southern areas is put somewhere in the region of a low overall average 850 Kgs., per hectare, in comparison with a regional neighbour and leading robusta producer, Vietnam, which country reports an average of around 2,700 Kgs., yield per hectare.
Within the northern hemisphere consumer markets meanwhile, the traditional summer holidays are in play. Commercial activity is hesitant within the macroeconomic inflation and interest rate factors, influenced by perpetual consumer retail end price pressure, and low liquidity within the inverted futures market structure. On the latter and while the spread has narrowed in New York though still at a premium, London has come off of the historical spread set earlier in June this year, although this market is still trading at record spreads daily.
The Certified washed arabica coffee stocks held against the New York arabica market were seen to remain increase by 2,493 bags yesterday, to register these stocks at 820,723 bags, with 98.33% of these certified stocks held in, Europe at a total of 807,005 bags and the remaining 1.67% being held in the USA at a total 13,718 Bags. Of this, a total 413,551 bags, or 50.39% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 15.32% of these certified coffees, from Honduras. The pending grading stocks were seen to decrease by 16,755 bags on the day; to register 2,543 bags pending grading on the day.
The September 2024 to September 2024 contract arbitrage between the London and New York markets widened yesterday, to register this at 35.25 Usc/Lb. This equates to 14.50% price discount for the London robusta coffee.
It was a mixed day on the commodity yesterday, ahead of key USA economic data to be released on Thursday this week. The Coffee, Cocoa, Corn, Soybean, Wheat and Palladium markets ended the day on a firm note, while the Sugar, Gold, Silver and Platinum markets ended the day on a negative note. The day starts with the U.S. Dollar trading at 1.293 Sterling, at 1.089 the Euro and with the US Dollar buying 5.571 Brazil Real.
The New York and London markets started the day yesterday trading on a modest firmer note, be to gain momentum during the early morning session. The New York market was slower to react and having set a higher level, traded either side of par in a comparatively quiet volume morning. Both the New York and London markets were seen to build support as the day progressed. The arrival of the America’s at the start of their business day pushed New York higher, triggering technical buy stops along the way to accentuate the gains for the day, this assisted to trigger speculative short covering which saw the New York market gain ground quickly throughout the afternoon session, with the London market following suit to make gains throughout the afternoon session, in modest volumes of trade. The New York market continued the upward momentum before being capped very late in the day, to see the market marginally drop back and settle on a very firm note at the close. The London market followed suit to settle on a firm note at the close, with most of the earlier gains of the day intact.
The London market ended the day on a positive note with 70.83% of the earlier gains of the day intact, while the New York market ended on a likewise positive note, with 77.32% of the earlier gains of the day intact. This follow through firmer close for the markets, might indicate some degree of support and direction with both the New York and London market gaining momentum throughout the session to settle near to the highs of the day, albeit in light volume of trade. One might therefore think that the markets will be set for another hesitant steady start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
SEP 4581 + 51 SEP 243.05 + 4.85
NOV 4407 + 52 DEC 241.30 + 4.60
JAN 4208 + 44 MAR 239.45 + 4.50
MAR 4039 + 37 MAY 236.30 + 4.35
MAY 3920 + 30 JUL 233.40 + 4.15
JUL 3815 + 18 SEP 230.70 + 4.00
SEP 3737 + 18 DEC 227.90 + 3.80
NOV 3680 + 18 MAR 225.00 + 3.60
